Finance Minister Nirmala Sitharaman
The Reserve Bank of India (RBI) is confident it will handle the credit policy without any major blips, finance minister Nirmala Sitharaman said on September 7.
India’s central bank has raised interest rates sharply since May to curb red-hot inflation. The monetary authority had for two years kept policy ultra-accommodative after the coronavirus outbreak.
“We are confident that the steps that the US Fed may take or the European Central Bank may take, the Indian central bank is fairly clued in into the developments which are happening all around and they are confident of handling the Indian monetary policy without major blips or rise and fall,” Sitharaman said at the India Ideas Summit organised by the US-India Business Council.
India has been able to lower inflation to manageable levels in the last couple of months, the finance minister said.
The headline retail inflation eased to 6.71 percent in July from 7.01 percent in June and an eight-year high of 7.79 percent in April.
Inflation is expected to moderate in the second half of this fiscal year, move within RBI’s 2-to-6 percent tolerance band in January-March and further lower in April-June 2023, RBI governor Shaktikanta Das has said.
Monetary policy would “remain watchful, nimble-footed and calibrated”, Das said on September 5.
Central banks across the world have also been tightening monetary policy amid skyrocketing prices, triggered in part by Russia’s invasion of Ukraine.
The Indian government held off on a large stimulus, unlike many developed economies, instead relying on targeted measures.
Fiscal policy during 2020 and 2021 was very guarded, Sitharaman said, driven by exhaustive and layered consultations. Since then, the revival of Indian economy has been helped by government measures and reforms, she added.
“There was no splurging of money, there was no over printing of currencies,” the minister said.
The Centre's finances look in good shape, so far, this financial year, with the fiscal deficit at only a fifth of the target at the end of the first four months.
The government is unlikely to increase its market borrowing when it announces the bond auction schedule for the second half of the financial year, according to an official.
The government is committed to lowering its fiscal deficit to less than 4.5 percent of the gross domestic product by the financial year 2025-26,from a targeted 6.4 percent this fiscal.
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